Refinancing Closing Costs

Just as when you first attained your mortgage, when you refinance your mortgage you will have some refinancing closing costs that you will have to pay. While you will invariably have some refinancing closing costs that you cannot avoid, there are ways that you can save some money. Here are four tips to help save money on your refinancing closing costs:

Tip #1: Since the majority of your mortgage payment goes toward paying down interest, and not to the principle, to save the most money on your refinancing you want to find the lowest rate possible. Some lenders will want you to pay "points" at your closing to bring your interest rate down. However, you can probably find a lower rate without having to pay the thousands of dollars in points if you do your homework and work with a reputable mortgage broker or two. You can use multiple brokers and compare the various fees each charges you.

Tip #2: While many lenders today are offering "no closing costs" mortgages, this is a very deceptive marketing tactic. While you may very well have no out-of-pocket costs at the closing table, you will be paying more for your loan in terms of a higher interest rate for the next 15-30 years. This means that while you may save a couple thousand dollars in refinancing closing costs, you will be paying tens of thousands of dollars more for your loan as the years go by. The tip here is to read the fine print and understand what "no closing costs" really means.

Tip #3: Should I Refinance to Consolidate Debt? If you are like most people, you probably have a lot of credit card debt. By refinancing while home mortgage rates are still relatively low, you can take out some extra money from your home equity and pay off all of your higher interest debt. If you have a lot of credit card, or other debt that has higher interest rates than your potential new mortgage, this can be a great way to save some money each month. If you are paying 20%-30% interest you can move that debt to your mortgage and pay less than 10%. This can amount to a big savings. Also, the added bonus of using your home equity is that your mortgage interest is probably tax deductible, which saves you even more money.

Tip #4: The one thing you should never do is to consolidate your student loans into your mortgage, if your student loan rates are lower than your mortgage interest rate. You only want to consolidate higher interest debt into your mortgage. With debt like student loans you are probably better off leaving them as a separate bill you pay off each month. If you have an adjustable rate mortgage or a mortgage with a balloon payment coming due at some time in the future, it really does make sense to consider refinancing while refinancing home mortgage interest rates are still relatively low. It also makes sense to take out some equity and pay off your higher interest debt.